How Dangerous Is This Strategy

loyek590 · May 1, 2015

volpunter said:
I do not let emotions come into play, especially not when sizing positions. And my breakout strategies are fully systematized, algorithmic strategies.

yes, it's obvious, your emotions are completely under control

trickshot · May 1, 2015

Fundlord said:
Leverage is all relative though, 10 times leverage on a multi week trade is high risk. But 50x on a seconds to minutes trade isn't as high risk.

How is it not as risky? The shorter time that you spend in the market is more than offset by the extra risk that you take with the crazy leverage. With crazy leverage all it takes is a move like the EUR/CHF slam that we saw a few months ago and you are done.

Gunning for a bigger move with low leverage is the only way to go for retail traders, don't try to steal HFTs' cheese or you will regret it.

volpunter · May 1, 2015

as described, longer-term holding does not have to mean wide stops. I use the same entry logic for one of my longer-term strategies. If momentum holds I reset my very tight stop to entry, essentially removing any remaining risk in the trade. Many of such trades stop out later on but the occasional one turns into a home run, exactly the intent of that strategy.

Fundlord said:
I mean if you are trading a long time frame, you need your stops much wider, when I trade my usual 1-10 strategy i have stops as wide as 2% with 10x leverage.

But when I trade short term I use stops of 0.1% with 20-50x leverage.

The leverage is against my total account value.

volpunter · May 1, 2015

in a trade, yes. That is why I enjoy ranting on the politics boards. If you do not like my advice on the technical and trading side then feel free to ignore, no hurt feelings :-)

loyek590 said:
yes, it's obvious, your emotions are completely under control

trickshot · May 1, 2015

volpunter said:
hmm? Leverage is relative but only relative to your account size not the holding period of positions. How so? So a 500:1 leverage with holding period of few seconds or minutes is also not high risk? If yes I strongly disagree. If no then how do you exactly delineate? And why is a 10:1 leverage high risk on a long-term position?

There is an intricate relationship between leverage, account size, and stop loss levels. Holding period certainly does not factor into this relationship and various position sizing equations.

Well actually holding period does affect this relationship because time in the market = risk, holding a position overnight alone exposes the trader to more risk because he cannot control risk adequately (due to possible gaps).

loyek590 · May 1, 2015

volpunter said:
in a trade, yes. That is why I enjoy ranting on the politics boards. If you do not like my advice on the technical and trading side then feel free to ignore, no hurt feelings

wasn't aware you were giving me advice, but I agree with you on another post, "long time frames don't necessarily mean wide stops."

but getting back to op, you and I both know it's a bunch of shit. Just something to play around with when the swing trades aren't swinging.

Fundlord · May 1, 2015

loyek590 said:
wasn't aware you were giving me advice, but I agree with you on another post, "long time frames don't necessarily mean wide stops."

but getting back to op, you and I both know it's a bunch of shit. Just something to play around with when the swing trades aren't swinging.

I know thats why I'm only dedicating 10-20% of my account to it. On a side note i don't "play" with trades, ill never enter one that I don't have strong conviction on. Thats why I end up waiting days or weeks for a good swing trade. But this way I wait a couple of hours maybe and catch 1 trade during the day.

My conviction is just as high as my swings, its not like I'm just hitting buy and sell multiple times a day like a maniac.

volpunter · May 1, 2015

we are talking currency markets, mate.

trickshot said:
Well actually holding period does affect this relationship because time in the market = risk, holding a position overnight alone exposes the trader to more risk because he cannot control risk adequately (due to possible gaps).

trickshot · May 1, 2015

volpunter said:
we are talking currency markets, mate.

But even those only trade 24/5 (actually 23/5), not 24/7, so gaps can still occur.

loyek590 · May 1, 2015

Fundlord said:
I know thats why I'm only dedicating 10-20% of my account to it. On a side note i don't "play" with trades, ill never enter one that I don't have strong conviction on. Thats why I end up waiting days or weeks for a good swing trade. But this way I wait a couple of hours maybe and catch 1 trade during the day.

My conviction is just as high as my swings, its not like I'm just hitting buy and sell multiple times a day like a maniac.

I have a trend strategy which I have developed over the years. I am constantly tweaking it, usually to my demise. But it goes through very large drawdowns and endless day after day markets that just can't seem to trend to get me out of the drawdown pit.

That's when I get bored and frustrated and just put on the opposite strategy in my paper account. At first it beats the hell out of anything I have been trading for years. But very shortly, all I am left with is big losers and small winners, and by then, the trend trading strategy is finally working again.